India one-year OIS surges to a three-week high as three rate hikes are fully repriced

⑴ India’s one-year overnight index swap rate continues to rise and has now fully priced in market expectations of three rate hikes over the next year. ⑵ The swap rate for this tenor has climbed to 6.10%, accumulating an increase of more than 30 basis points in the past two weeks. ⑶ The latest escalation in tensions between the US and Iran has pushed up oil prices, with Brent crude benchmark price staying around $114 per barrel. A foreign bank trader noted that the market is slowly accepting the reality that oil price pressure will not easily dissipate, bringing rate hike discussions back to the table. ⑷ UBS has moved up its forecast for the timing of rate hikes in India to the October-March period, whereas previously the institution expected rates to remain unchanged throughout 2026. ⑸ India’s two-year swap rate is quoted at 6.35%, with the most liquid five-year OIS rate at 6.73%.